WME-IMG deal shows changing media landscape

It's the coming together of one of Hollywood's most powerful agencies—William Morris Endeavor, backed by private equity partner Silver Lake, and the biggest global sports and event marketing agency, IMG Worldwide.

On Wednesday, WME and Silver Lake announced a deal to buy IMG, and though they didn't disclose details, they're reportedly paying about $2.4 billion for the agency. Together the two firms will create a global powerhouse that spans traditional entertainment, live events, sports, modeling and music.

Why is it such a big deal? It shows the shift away from the slower-growing traditional movie business, once Hollywood agencies' bread and butter. It's a move toward sports—increasingly the most valuable content, since it's the rare type that must be viewed live. Plus, it's a vote of confidence in live events, which consumers and marketers are willing to pay up for—they're arguably increasing in value with the global conversation on Twitter and Facebook.

And while movie stars are unpredictable sources of revenue—what if Ben Affleck decides to take a year off from acting or directing?—IMG has the kind of lucrative long-term contracts that provide a valuable revenue stream.

WME will look to leverage IMG's big names and marketing and licensing relationships across its entertainment business as well as its advertising business (WME owns half of ad agency Droga5).

But perhaps more important than that cross-pollination, IMG brings WME global reach. Its TV production arm could be hugely valuable to WME's TV talent in particular, and the major events business—including Wimbledon and New York Fashion Week—not only provide predictable revenue, but key access for WME's stars. Plus there's IMG's licensing business as well as college and professional sports rights.

WME's co-CEOs, Ari Emanuel (known as the inspiration for the Ari Gold character in "Entourage") and Patrick Whitesell will be co-CEOs of the combined company. In this new role they'll wield more power, as the acquisition leapfrogs their company over rival Creative Artists Agency, which moved into the sports business a few years ago. The scale of the combined company should yield more negotiating leverage across its deals.

The downside of the acquisition? Sources say IMG has more than $700 million in debt. WME and Silverlake must believe that the economies of scale and global reach will justify the costs that come along with that kind of leverage.